In military terms, the West’s response (supported by allies like Australia) will increase as China seeks greater international influence.
While Professor Hugh White in his book How To Defend Australia suggests that military spending may need to increase to around 3.5 per of cent of GDP for its security needs given his belief that US power will decline in the region, others rightfully point to the ongoing “viability of US bases” in the Pacific, the possibility of Asian states (including India and Indonesia, Vietnam and Singapore) “working in coalition against the ambitions of China”, and the “prospective role of the US as an offshore balancer against a strong China” (Paul Monk ‘Imperfect protection Australia’s defence policy and military force structure’, Weekend Australian, 6 July 2019, p. 20)
In the South China Sea, a crucial source of transportation for regional and global economic activity, the USS Ronald Reagan carrier strike group recently conducted exercises there with the Japan Maritime Self-Defence Force’s Escort Flotilla 1, which included the Izumo multi-purpose destroyer that is slated to become Japan’s first carrier in decades (‘China has reportedly been practicing sinking ships with missiles in the South China Sea’, Business Insider Australia, 2 July 2019).
The July 2019 Talisman Sabre war games on the Queensland coast involve thousands of military personnel, mainly from the US and Australia, but also from Britain, Japan, New Zealand and Canada, with delegations from India and the Republic of Korea observing.
In 2018, the France signed joint agreements on closer defence and cyber ties Australia and called for Australia, France and India to strengthen ties for stability in the region in order “to protect our economic interests as well as our security interests” (‘Shared interests sit alongside shared values’, The Australian, 28 June 2019, p. 1).
But beyond the reality that military capability will always be an important deterrent, with military spending likely to increase further in line with growing Chinese aggression (including in Australia), Australia’s support of US and Western interests makes solid policy sense in economic terms.
While Prime Minister Scott Morrison noted prior to the G20 summit that the growing trade war between China and the US may hurt smaller countries, he conceded that many US grievances were justified given China’s intellectual property theft, industrial subsidies, forced technology transfer and digital rules with regard to e-commerce (‘Morrison urges G20 trade led recovery’, Australian Financial Review 28 Jun 2019, p. 1).
While Australia and other existing or potential allies are right to express concern at the Trump administration’s threat not to appoint new members to the WTO’s dispute-settling body by 10 December 2019, which will allow the US to impose new trade barriers without fear of WTO-sanctioned penalties (‘Risk to WTO threatens trade war Armageddon’, Australian Financial Review, 3 Jul 2019, p. 10), few will argue that the WTO needs to change the rules with regard to China.
The tough American attitude towards China does not come without an economic cost for the US. After all, tariffs raise the price of US consumer and business goods, US taxpayers were expected to pay $28 billion in subsidies to compensate farmers for lost export sales, and considerable manufacturing production had or was preparing to move from China to Southeast Asia and Mexico rather than the US.
But Australia will have to make tough economic policy choices to support the US against China. Australia was correct to support the US banning Huawei given the possibility of control by China’s communist party given that this technology is expected to connect critical infrastructure such as energy and water, and enable new technologies such as driverless transportation.
PM Morrison is also correct to give support for the Japanese-led pushback on Chinese “debt trap” lending with a support for overseas infrastructure spending by G20 nations be linked to job creation and economic returns, take into account the full costs to the borrower, ensure environmental compliance and ensure disaster resilience.
Already, Sri Lanka has handed over its port of Hambantota to China (near the world’s busiest east-west shipping) on a 99-year lease after failing to meet loan repayments, and Papua New Guinea’s $136 million Huawei internet cable connecting 14 provinces broke in four places from an earthquake (‘PM backs move to head off ‘debt trap’, The Australian, 28 Jun 2019, p. 9).